U.S. stocks close lower; Dow ekes out a gain

J.P. Morgan, Goldman Sachs beat earnings estimates

NEW YORK (MarketWatch) — The U.S. stock market closed lower, dragged down by sharp declines in momentum stocks after the Federal Reserve suggested valuations on biotech and Internet stocks may be stretched.

A positive start early in the session on better-than-expected results from J.P. Morgan Chase & Co. and Goldman Sachs Group Inc. and generally positive economic data fizzled out when Fed Chairwoman Janet Yellen began her two-day congressional testimony.

The S&P 500
SPX, -0.23%
recovered some of the losses, but closed 3.78 points, or 0.2%, lower at 1,973.32. The Dow Jones Industrial Average
DJIA, -0.32%
ended the day 5.3 points higher at 17,060.75, after setting an intraday record in the morning. The Nasdaq Composite
COMP, -0.01%
dropped 24.03 points, or 0.5%, to 4,416.39. The Russell 2000
RUT, +0.54%
fell 11.5 points, or 1%, to the preliminary 1,154.18.

“Investors are particularly interested to see proof that earnings did bounce back in the second quarter. If we do not see solid growth and positive outlook for the rest of the year, we might see some repricing, as current multiples without growth are not sustainable,” said Drew Wilson, investment analyst at Fenimore Asset Management

Yellen never mentioned the stock values of social media and biotech companies in either her prepared remarks or answers to the questions from the senators. That reference to valuations, which hit the Nasdaq, was in a separate Fed monetary policy report submitted to Congress along with Yellen’s testimony.

Yellen to testify before Congress

Among the day’s economic news, Empire State manufacturing activity picked up in July to its highest reading in four years. While retail sales in June rose less than expected, most stores except for auto dealers and home-improvement outlets boasted an improvement in revenue.

Yahoo Inc.
YHOO, -2.00%
shares rose over 3% in after-hours trade after reporting second-quarter results that were in line with expectations. Intel Corp.
INTC, +0.14%
also rose 3.4% after-hours, following quarter reports. Read more about the day’s notable movers here.

Gold recovers, pound rallies

Asian markets did build on those gains, with the Nikkei 225 indexNIK, +0.30%
settling at a more than one-week high. GoldUS:GCU4
fell for a third session on Tuesday on the back of dovish comments from Federal Reserve Chairwoman Janet Yellen. Crude oil futuresUS:CLQ4
futures succumbed to renewed selling pressure Tuesday, pushing the U.S. benchmark back below $100 a barrel for the first time since May.

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